Chery Automobile, China's rising independent carmaker, is preparing for a foray into the commercial vehicles sector to speed up its expansion, according to sources familiar with the company.

The carmaker in Wuhu, a city in East China's Anhui Province, has formed a commercial vehicles unit based on a failed bus plant acquired from the nation's top vehicle producer First Automotive Works Corp (FAW) at the beginning of this year, sources said.

Chery plans to start production of its own-brand commercial vehicles in 2008, aiming for an annual output of 300,000 units by 2010, sources said.

It expects to reap 10 billion yuan (US$1.2 billion) in sales revenue from the commercial vehicles business annually in 2010, one-eighth of its overall turnover in the year.

According to Chery's website, it aims to boost overall sales to 1 million vehicles a year by the end of this decade from 189,000 units last year.

The company currently makes low-cost cars under its own badge.

It has also set up a commercial vehicles engineering institute to develop new products. Commercial vehicles include trucks and buses.

A Chery spokesman yesterday declined to confirm the commercial vehicles sector plan.

The bus plant, also located in Wuhu, was launched in 1993 by FAW and the local government with an investment of 470 million yuan (US$58.7 million). It has a manufacturing capacity of 2,000 buses and 30,000 chassis a year.

But the plant hit severe financial trouble in 2002 due to sluggish sales.

Zhao Shengli, an auto analyst with China Galaxy Securities Co Ltd, said it's a "natural move" for Chery to enter the commercial vehicles market as it needs a broader product spectrum to achieve its ambitious sales target.

"It therefore aspires to the commercial vehicles sector. China's commercial vehicles market will continue to grow in the coming years, but competition has been very fierce with lots of players," Zhao told China Daily.

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